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In Mel Cohen Realty Ltd. v. Merget Holdings Inc., the court considered whether a lender – who had no right under the mortgage itself to appoint a Receiver – could bring a freestanding application under bankruptcy legislation, for a court order appointing one. This was despite the lack of an “insolvency” or other triggering event as required under those laws.

The facts involved a commercial property in Ottawa, over which there was a vendor take-back mortgage. The borrower failed to pay the outstanding balance at mortgage maturity. The lender duly delivered a demand for repayment, but then took none of the typical steps towards enforcement, such as exercising a power of sale. Instead, it brought a stand-alone court application seeking to have a Receiver appointed under either the Bankruptcy and Insolvency Act (BIA) or the Courts of Justice Act (CJA).

The problem was that the BIA remedy was triggered by an “insolvency”, which was arguably not in play here. Likewise, the CJA called for a prior “interlocutory order” by the court – meaning one that had been issued during the course of an existing lawsuit. There was no such prior litigation or order in this case.

The judge declined to appoint a Receiver in these circumstances. There was no evidence that the borrower was “insolvent” within the meaning of the BIA. His simple refusal to pay a contested debt did not alone demonstrate insolvency for these purposes. Nor were the tests under the CJA met.

The judge emphasized the court appointment of a Receiver is an extraordinary remedy, and not one to be granted routinely or as a matter of convenience. This was especially true where the mortgage itself contained no contractual right for the lender to seek a Receiver appointment, as here. While this does not prevent a court from exercising its discretion to do so, it does raise the threshold for judicial intervention.

The court explained that before it could appoint a Receiver, there must typically be an urgency, a need to protect other creditors, or a risk to property. None of those circumstances were present here. There was no evidence that the value of the property was in jeopardy, or that the borrower was failing to meet other financial obligations. There were no third parties or other creditors who stood to be prejudiced without court involvement. In short, nothing supported the granting of a stand-alone remedy in this case.

The court also noted that the borrower’s equity in the property appeared to be more than sufficient to cover the outstanding mortgage, so there was no immediate practical benefit to selling the property under a court-appointed receivership. In the judge’s view, it was inappropriate to use a freestanding receivership appointment application as a way to bypass the ordinary safeguards built into private enforcement mechanisms or mortgage litigation. The lender had also not explained why it had not brought a traditional mortgage action, aside from speculating that the borrower would likely defend it.

For all of these reasons, the application was dismissed. However, the court left open the possibility that a renewed application could be made in future if circumstances changed.

This decision serves as a reminder to lenders that:

• Courts will be reluctant to appoint a Receiver unless there is a contractual right or clear evidence of urgency, insolvency or other exceptional circumstances.
• Where a mortgage is disputed and other remedies are available, lenders are expected to follow traditional enforcement processes.

See Mel Cohen Realty Ltd. v. Merget Holdings Inc., 2025 ONSC 1242.